Australian consumers who are willing to reduce piracy can make a big difference

by David Newhoff

As a blogger writing about copyright and digital-age issues, I’ve read a lot of explanations for what we generally call “piracy” of entertainment media. The rationales are much the same across the English-speaking world, (at least among nations where government censorship of speech is not a factor); and nearly all the arguments and justifications are based on false assumptions about how filmed entertainment, and other creative content, is financed, produced, and distributed.

Of course, there are the Crusaders - the folks who naively believe piracy is a cause that, among other things, is teaching the content makers how the market and the internet really work. And then we have the Berserkers - the ones who like to associate just about any kind of socio-political outrage with their inalienable right to freely stream Game of Thrones. Go figure.

But most people are neither Crusaders nor Berserkers. In fact, according to focus group research, about 65% of Australian users state that a primary reason for accessing filmed entertainment via torrent and other illegal sites is lack of affordable access compared to markets like the US and the U.K.

This is an understandable frustration in a globalized and networked world. When consumers complain, for instance, that they're going to encounter spoilers via social media from Americans who've seen a season of a TV show that Aussies won't receive for several months, this sounds like a fair complaint - even if I would not endorse enriching the criminal operators of pirate sites as a solution.

It's worth noting, of course, that a lot of Americans also cite a lack of access as their rationale for pirating content, despite the fact that we have access to everything, and at prices far lower than they were 20 years ago.

So, the truth remains that many people pirate because it's easy, because it's habit, and because there are no real consequences for doing so.

But the Australian consumer, who is sincere when he says that he'd stop pirating if he had the same access as American viewers, should not also buy into the Crusader's false belief that piracy is exerting market pressure that will force the industry to adapt faster.

Legitimate adaptation is not remotely as simple or cheap as people seem to think it is. And legal business models cannot rationally be compared to criminal ones, where products are made available by ignoring the rights and compensation owed to tens of thousands of workers. No legal entity can compete with a black market - not in any industry.

At the same time, piracy can actually retard investment in improving the legal market because there truly is a tipping point when the piracy habit becomes so widespread and entrenched that investors will write off a market as a lost cause. I can't say where that tipping point is, but it is arguably easier to reach in a nation of 24 million than it is in a nation of 300 million.

So, a vicious cycle can ensue whereby increased piracy is rationalized by the lack of a more robust, legal market but simultaneously deters investment in a more robust, legal market.

Meanwhile, the producing industry is undergoing tremendous change (e.g. streaming-only players competing with traditional producers), through which nobody can accurately claim exactly what the effects of piracy will be, other than to assume that a tipping point also exists for the global market.

The current growth in production by new players like Netflix is substantially funded by debt capital, suggesting that, eventually, the current rate of productivity will flatten out and probably even retract somewhat if these producers are ever going to be profitable. So, while it's hard to say what effect a parallel black market will have on the present, dynamic industry, there should be no doubt that the effect is exclusively negative.

As a counter-narrative, to what I just said, the most popular excuses for piracy are that rich, Hollywood moguls don't need more money and that Hollywood continues to make record profits despite piracy. The fact is, however, those rich moguls represent a small fraction of the people who make films and television; and those Hollywood profit numbers only represent a minority segment of the products - namely, the big blockbuster movies.

Most filmed entertainment is independently produced, often with narrow profit margins where piracy really can be the make-or-break difference in producers, actors, and crew members getting paid - not millions, just middle-class earnings.

I think of one colleague who is currently on the festival circuit with a new feature film that was just picked up by a distributor. He's an independent filmmaker in every sense of the word, boot-strapping and partly crowd-funding his way through the process.

To date, he has invested more than five years of his own sweat equity into the project; and if things go very well, he and others who invested either time or money might start to see a return a few years from now.

If the film turns out to be a breakaway hit, and we see him at the Golden Globes next year, the piracy advocates will think, "There goes another Hollywood millionaire who doesn't need my money, so who cares if we pirate his movie? Besides, we probably helped promote the film."

I can assure the reader that none of those assumptions is true, and that this filmmaker's anecdote is far more typical than you would ever know. In fact, this filmmaker once told me unequivocally that if his spouse were not a doctor, he would not be making movies.

How many readers can say that they're in a position to work on a project for three, five, or ten years before they start to be compensated? When a production does make good money, pay back its investors, and reap some profit for the creators, this translates into the next round of sweat-equity investment in the next project. And this cycle is where some of the best, most innovative movies and TV shows come from.

At the same time, because there are a handful of actors, producers, and craftspeople who make extraordinary livings from big movies, these are quite often the same people who invest their time or money in independent projects. In short, you can resent movie stars if you really want to, but piracy isn't going to harm them until it first harms a much larger population of middle-class artists and craftspeople.

I don't imagine for a moment that anything I write here would outright stop Australian consumers from pirating content. But based on the data, there is both opportunity and desire to reduce piracy, especially where legal access is otherwise available. To the extent Australians are willing to dismiss most piracy rationales (because they are all incorrect) and at least not pirate what is accessible, a measurable reduction in illegal access is far more likely to accelerate investment in a more diverse and more affordable, legitimate market than increased piracy will accomplish anything at all.